Presentation on theme: "Competition law and consumer protection"— Presentation transcript:
1 Competition law and consumer protection Cornelius DubeCUTS Centre for Competition, Investment and Economic Regulation (CUTS CCIER)
2 Outline Consumer Welfare indicators Competition law objectives and consumer welfareCompetition law and consumer rightsCompetition law and consumer protection frameworksFactors to determine frameworksRecommendations
3 Consumer Welfare as satisfaction in trade A consumer is generally satisfied in trade if happy with the following attributes:PricesChoicesQualityProximityThese can be used as acceptable measurements of consumer welfareCan the implementation of a competition law assist in attainment of these four attributes?
4 Consumer welfare as attainment of basic rights The Consumers International Charter recognises eight basic consumer rights as follows:right to basic needs;right to safety;right to choice;right to redress;right to information;right to consumer education;right to representation; andright to healthy environmentCan a competition law help in the attainment of any of these rights?
5 Competition law objectives and consumer welfare Static Efficiency:Lower pricesBetter qualityMore choiceDynamic Efficiency:Efficient allocation of resourcesManagement, processing and technological improvementsProduct innovationThese objectives all have consumers as the ultimate beneficiaries and result in satisfaction in trade (consumer welfare)Competition laws can be used to attain consumer welfareConsumer interests are specific concern of EU LawThe UN Set of Principles and Rules on Competition has Consumer Welfare among its Objectives
6 Competition laws and consumer rights The right to basic needs (through the price effects and increased production) and the right to choice are directly enhanced by competition law enforcement for all jurisdictions.Some competition laws also include unfair trade practices (UTPs), which directly benefit consumers rather than indirectly.In addition to the general issues such as bait and switch, misleading advertising etc, UTPs provision include issues addressing some basic rights such as:obligations to indicate prices and terms of trade and prohibiting misleading advertising (right to information);compensation for harmful and defective products (right to safety and right to redress);Competition laws can also be used to attain some basic consumer rightsThe recognition of the common objective has also given rise to operational framework questions
7 Competition and consumer protection frameworks Hybrid laws, where the competition law also include provisions relating to consumer protection issuesE.g. Zambia, Zimbabwe and Tanzania also encompassed consumer protection issues under UTPs in the competition lawHybrid agency, where there are two different laws on competition and consumer protection, but the laws are enforced by one institution.Eg. The ACCC of AustraliaTwo separate institutions- competition authorities handling competition issues while consumer protection institutions handle consumer interest issues, including UTPsIndia, CCI and CAT enforces Competition Act, 2002 while COPRA 1986 is enforced by a Central Consumer Protection Council.South Africa, the Competition Commission and the Tribunal for competition Act, 1998 while a National Consumer Commission enforces the Consumer Protection Act.
8 Factors to determine frameworks The country size and resources are sometimes used as the basis for choosing a framework.For small economies, it is normally recommended that hybrid laws and agencies are more appropriateHybrid laws and agencies also save resources, and are also recommended for poor countriesExpertise considerations are also importantMost competition authorities lack the technical knowledge regarding the implementation of consumer laws, e.g. cheating on weights and measures; over-indebtedness of consumers; small-claims damage actionsMultiple agencies can give rise to conflicts, influenced by vested interest groupsAbsence of perfect or total complementarity between the two policies imply difficulties in their implementation by one agency; conflicts are possible, e.g price controls.
9 Factors in choosing frameworks (cont..) Establishing one comprehensive law to cover both competition and consumer issues is not an easy task- critical provisions in one or both may be left out.Enactment might be easier compared to enforcement- having one regulatory authority in charge of two policies implying a multiplication of the implementation gaps for the two laws.Line ministries may be different, e.g while competition authorities are largely hosted by the Ministry of Industry, consumer protection authorities may fall under the Ministry of social welfare/affairs.
10 Pros and Cons (Summary) Competition Authority for both lawsSeparate body for each lawProsConsAvoidance of unnecessary clashes which delay implementation.May result in one party making decisions that negatively affect the interests of the other party, such as a consumer authority making decisions that negatively affect firms and competition.Allows the institution to make a balanced view by being conscious of the other lawCostly to implement, as two separate organisations with their own budgetary requirements would need to be catered for.A cost saving measure, as it limits dependents on the national budgetLack of technical capacity to handle the two complex issuesThe set up allows each institution to handle issues for which it is best empowered. It allows for specialisation for the authorityChallenges in the enactment of a comprehensive law which covers both issues without necessarily appearing contradictoryAllows for extensive coverage of all issues to be dealt with in the consumer law, as focus would be totally on consumer law and not competition lawAbsence of total complementarity between the two policies also compromises their implementation by one institutionAllows for the flexibility in both implementation and enactment of the consumer law, given that it given the consumer authority the freedom to act independently of the competition authorityConsumer issues and competition authorities may not be under the ambit of the same MinistryCoordination with line Ministries will be much easier. Accountability to one Ministry also ensures less variance of objectives and vested interests.
11 RecommendationsCountries should choose a framework that is likely to bring the best outcome for both competition and consumer protectionThe drafting of comprehensive laws is one of the most important aspect in ensuring better outcomes; this is best if separate laws existIdeally, both competition and consumer protection issues are too important issues requiring specialized skills for agencies- separate institutions could be better.For small countries and most developing countries, it might be better to find ways of creating a hybrid agent which is very competent to handle both competition and consumer protection issuesFunding; separate departments to allow specialization; quality staff etc.